Friday, July 18, 2003

More on Controlling Drinking

One possibility that I've never seen considered would be to set up a system of "Tradable Alcohol Permits," akin to the tradable emissions permits that are used for sulfur dioxide in the United States or the "individual transferable quotas" that are used in fisheries throughout the world.

The government could set up a societal maximum of alcohol consumption, say, one drink per day per person. It would then set up a yearly auction for roughly 102 billion drink-a-day permits (i.e., 280 million people times 365 days in the year). In the initial auction, wine and beer manufacturers would probably purchase large blocks of permits, and then resell the permits to individual drinkers.

The only problem with this approach is that tradable permits are used to control the overall societal level of pollution, while leaving it up to individuals and corporations to decide how that overall cap is going to be divvied up. That means that if Company A finds it cheap to reduce pollution while Company B is finding it very expensive to reduce emissions any further, Company B can buy Company A's permits. Society is happy because the overall level of emissions is still being reduced, and Company B is being forced to internalize the costs of polluting.

But with drinking, we do not just care about controlling the overall societal level of drinking. We care about the distribution of drinking as well. We would not be happy if 10 non-problem drinkers stopped drinking and sold all their permits to a problem drinker who could then put down 11 drinks per day.